HMS Fantome (1814) shipwreck

[Story]

Wrecks to riches: Siren song of treasure hunt

A Bucks salvage firm went public after a big find, but investors in sea hunts shouldn't be holding their breath.

By Thomas Ginsberg

Inquirer Staff Writer

Taking a company public is risky. Searching for buried treasure is chancier. Staking a claim on government artifacts may be plain lunacy.

Put them together, however, and you have the makings of a viable treasure-hunting business. Or so hopes a group of Bucks County entrepreneurs, who took their shipwreck salvage business public last year and now have an international fracas on their hands.

Sovereign Exploration Associates International Inc., of Newtown, believes it has pinpointed off the coast of Nova Scotia a trove of 19th-century artifacts and coins from the White House and U.S. Treasury that the British plundered during the War of 1812.

The company says the long-missing loot may have gone down on a British 18-gun brig, the HMS Fantome, which sank in 1814 off the coast of Halifax, then a key British port. Historians say the missing artifacts would have immeasurable historic value, but no documents have turned up proving or disproving the Fantome actually carried them.

None of that bothers modern treasure hunters. Their age-old pursuit long has been grist for Hollywood films, childhood games and seafaring eccentrics. Now, swashbuckling entrepreneurs are giving the high-risk business a 21st-century makeover in a bid for investors and public respect.

The Fantome itself is gone, pulverized in the turbulent Canadian waters that have claimed hundreds of ships. But Robert D. Baca, the entrepreneur from Ivyland Borough who runs Sovereign and held the sole license to explore the site, said its divers had found about 60 pre-1814 U.S. and British coins, cannonballs and musket shot, and copper buttons and copper sheathing embossed with English naval or royal emblems.

Baca, a onetime medical-device marketer, cautions in interviews that Sovereign still lacks proof it found the Fantome. Then he tantalizes with tales of lost U.S. treasure, including 200-year-old White House silverware and rare silver dollars minted in Philadelphia.

Sovereign's "pile," in salvage speak, has set off a transatlantic storm. A Halifax-based documentarian, John Wesley Chisholm, began criticizing the company last year even as he himself considered filming - not excavating - the site. Chisholm said Canada "should not be farming out our own marine cultural heritage to treasure hunters. We should do it ourselves, or we should do it with oversight."

Then earlier this year, the British government staked its own claim and persuaded Nova Scotia museum authorities to withdraw Sovereign's salvage permit. Britain "wants to protect the remains of our servicemen and women who have lost their lives serving their country," the British Embassy said.

There may be a hitch: Nobody died when the Fantome hit a shoal and took hours to sink. A British Embassy official in Ottawa, speaking on condition he not be identified by name, said London is concerned about remains of any Britons in the area strewn with other British wrecks. The official emphasized Britain was not claiming any U.S. booty itself: "Stolen fair and square? We're not saying that."

Nova Scotia is demanding 10 percent of the value of items recovered, as allowed under provincial law. It has impounded the items Sovereign found so far.

The U.S. government wants its stuff back, if it's there, but for the moment is officially on the sidelines. "If items are recovered, the U.S. will work with the U.K. and Nova Scotia on their return," said James K. Foster, a U.S. Embassy spokesman in Ottawa.

Sovereign, for its part, wants any valuable coins and documentary rights but promises to hand over historic artifacts, Baca said. Company officials plan to meet British authorities in London soon, although resolving the standoff and retrieving and verifying any artifacts likely will take several years, he said.

Until then, Baca and his partners, including co-owner Barry Gross of Bensalem, board member John J. Barr of Willow Grove, and accountant Kevin J. Conner of Newtown, are trawling for support and investors. After taking a beating in the Canadian media this year, the company hired a Philadelphia public relations firm, Braithwaite Communications, to fight back.

Six years ago, there was only one public treasure-salvage company, Odyssey Marine Exploration Inc., of Tampa, Fla. Its discovery of the HMS Sussex, a 1694 wreck off Gibraltar whose cargo Odyssey values at around $1 billion, showed there might be an alternative to the private backers who long have bankrolled treasure hunters.

Inspired by Odyssey, Admiralty Marine Operations Ltd., of suburban Atlanta, went public in 2000. Sovereign followed in 2005. And this year, Deep Blue Marine Inc., of Salt Lake City, appeared with a pitch for investors by actor James Brolin, who is also an investor.

The spate of newly public companies was partly coincidence and partly a response to changing market conditions: New sonar technology has become available, precious metal prices are high, venture capital has tightened up, and adventure-seeking investors are on the rise, said company executives.

Most said their revenue model is to sell or leverage their gold and silver coins and artifacts, or to sell rights for documentaries or exhibits. Some supplement treasure hunting with mundane salvage work.

"Billions of dollars! You cannot begin to imagine how much money is out there, and that's why there are four [public] companies," said Wilf Blum, founder of Deep Blue, who said he was looking for a fun way to invest his fortune from the stock market.

In reality, earnings are few and far between, and stock prices are dismal. Only one, Odyssey, holds its share value at between $2 and $4. The rest trade for pennies, far below their initial prices. Admiralty is technically in default, and its chief executive said treasure hunting is really more like a lottery than a business.

"You don't get anything, you don't get anything, you don't get anything. But when you hit, you'll find more than the total invested," said Admiralty chief executive George Collingwood, a onetime manager at Allied Signal Corp.

Sovereign, for its part, reported a loss of $1.6 million for the year ended June 30 and an accumulated loss of $19.1 million.

Greg Stemm, Odyssey's cofounder, said the upstarts prey on "the age-old lure of the sea and 'get rich quick' promises." In an e-mail response to questions, Stemm claimed Odyssey's backers included average people who "buy stock to be 'part of the adventure,' " as well as major institutional investors, such as Vanguard and TIAA-CREF.

All the companies said their business is enormously risky. One said it attracts deep-pocketed investors who like to boast about their eccentric stock holdings "at cocktail parties."

A financial columnist, Chuck Jaffe, has ridiculed the whole racket and once labeled Deep Blue a "Stupid Investment of the Week." Deep Blue founder Blum responded: "Don't put anything in this stock that you cannot afford to lose."

At the same time, the new companies insist they are different from "smash and grab" salvors that peddle trinkets on eBay or mishandle artifacts, such as Sub-Sal Inc., a defunct company that provoked outrage in 1984 when it ravaged the 186-year-old wreck of the HMS DeBraak off the Delaware coast.

"If we find something, we can't just slip away without reporting it. How would we report the income? We have to answer to shareholders," Collingwood said.

But Robert Neyland, a board member of the Advisory Council for Underwater Archaeology, an association of marine archaeologists affiliated with the nonprofit Society for Historical Archaeology, doubted the companies' pledge and dismissed their assertion that nothing would be retrieved if not for them.

"I see more and more private entities and nonprofits" doing salvage work, Neyland said. "They're interested in the history and adventure, not the money."

For their part, the public companies all said they have close relations with museums and employ archaeologists who document all finds.

Said Baca: "We're not just running a business. We're in the middle of changing an industry."

Salvage Companies

Sovereign Exploration

Associates International Inc.

Location: Newtown, Pa.

Ticker: SVXA

Web site: www.sea-int.com

Odyssey Marine

Exploration Inc.

Location: Tampa, Fla.

Ticker: OMR

Web site: www.shipwreck.net

Deep Blue Marine Inc.

Location: Salt Lake City

Ticker: DPBM

Web site: www.alldeepblue.com

Admiralty Holdings Co.

Location: Douglasville, Ga.

Ticker: ADMH

Web site: www.admiraltycorporation.com

Big Finds Are Rare, But Make a Splash Who Owns a Shipwreck?

The Spanish galleon Nuestra Senora de Atocha, which sank in 1622 with silver, gold and emeralds, was found off the Florida Keys in 1985 by private salvor Mel Fisher. He fought U.S. and Florida claims up to the U.S. Supreme Court. He later donated part to Florida.

The British warship DeBraak, which sank off the Delaware coast in 1798, was found in 1984 by private Sub-Sal Inc. Its bungled recovery fueled 1987 passage of the U.S. Abandoned Shipwreck Act.

The mail ship Central America, which sank off the South Carolina coast in 1857 with gold now valued up to $400 million, was found in 1988 by private Columbus-America Discovery Group. Ownership disputes continue to this day.

The French ship the Belle, which sank in 1686 in Texas' Matagorda Bay, was excavated in 1995-96 by the Texas Historical Commission. After resolving an ownership dispute with France, Texas gained control of more than a million artifacts, including the hull.

The British warship Sussex sank off Gibraltar in 1694 with gold and silver now valued at about $1 billion. In 2002, Odyssey Marine Exploration Inc. announced it had found the wreck. Odyssey has an agreement with Britain, and is negotiating with Spain to excavate the site.

A patchwork of state laws, federal law, international treaties and foreign laws governs wreck salvage and preservation.

If a ship is deemed abandoned in international waters, a salvage company can claim ownership. But often, a government reclaims ownership. Coastal provinces, U.S. states or even adjacent countries also may demand some artifacts or a percentage of their value. Salvors also may fight each other for rights or profits.

The result: Discovery of a valuable wreck almost always means a long and costly legal battle and a smaller reward at the end.